Deepak Gupta | Jun 29, 2017 |
What is composition Scheme Composition Scheme Rules under GST
What is GST Composition Scheme
Before we should read composition scheme rules we should know what is Composition Scheme. Every s businesses needs to taken several actions to ensure compliance with statutory provisions. Compliances like periodic payment of taxes, filing timely returns and maintaining prescribed records are necessary steps in a tax system for corporate taxpayers. However, small businesses find it difficult to deal with such requirements of the law due lack of knowledge and expertise. The composition levy is an alternative method of levy of tax designed for small
taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States ) . The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers.
To make compliance easier for such businesses, Law have have provisions for payment of a composition levy by small businesses. This ensures greater compliance without the need for maintaining copious records.
The One Nation One Tax Scheme (GST) which promises to club all the indirect taxes into one also boasts a composition scheme for small businesses. The GST Composition Scheme will make compliance with tax laws hassle free for eligible businesses opting for the scheme.
Also See: Frequently Asked Questions on Composition Levy
Composition Scheme Rules under GST:
Composition Scheme Rules under GST provide for all the procedural compliance w.r.t. intimation for Composition Scheme, effective date for levy, conditions and restrictions on levy, validity of levy and rate of tax.
Details | Particulars | |||||||||||||
| Introduction | Composition Scheme Rules under GST provide for all the procedural compliance w.r.t. intimation for Composition Scheme, effective date for levy, conditions and restrictions on levy, validity of levy and rate of tax. | |||||||||||||
| Intimation for Composition Levy | 1. Any person being granted registration on a provisional basis and who opts for Composition Levy shall file an intimation in FORM GST CMP01, duly signed, before or within 30 days of appointed date. 2. If intimation is filed after the appointed day, the registered person: a) Will not collect taxes b) Issue bill of supply for supplies ؠ For fresh registration under the scheme, intimation in FORM GST REG01 must be filed. 3.Every composition scheme holder must fulfill following yearly compliance: a) Intimation in FORM GST CMP02 for exercise option b) Statement in FORM GST ITC3 for details of ITC relating to inputs lying in stock, inputs contained in semifinished or finished goods within 60 days of commencement of the relevant financial year 4. Any person who files an intimation in FORM GST CMP01,must also file FORM GST CMP03 within 60 days of exercise of option: a) Details of stock b) Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of option Any intimation filed in FORM GST CMP01 or FORM GST CMP02 will be deemed to have been filed for all the places of business having the same registered PAN. | |||||||||||||
| Effective date for composition levy | a) The option to pay tax under Composition Scheme shall be effective: Appointed date where FORM GST CMP01 is filed Beginning of the financial year where FORM GST CMP02 is filed b) The intimation filed in FORM GST REG01 shall be considered only after grant of registration to the applicant. Option to pay tax under Composition Scheme shall be effective from: where the application for registration has been submitted within thirty days from the day he becomes liable for registration, such date. If above condition is satisfied, the effective date of registration shall be the date of grant of registration | |||||||||||||
| Conditions and Restrictions for Composition Levy | 1. The person opting for the scheme must neither be a casual taxable person nor a nonresident taxable person. 2. The goods held by him in stock on the appointed date must not be purchased from a place outside his state. The goods should therefore not be classified as: Interstate purchase Imported Goods Branch situated outside the State Agents or Principal situated outside the State 3. Where the taxpayers deals with unregistered person, tax must be paid or no stock must be held 4. Mandatory display on invoices of the words composition taxable person, not eligible to collect tax on supplies 5. Mandatory display of the words Composition Taxable Person on every notice and signboard displayed at a prominent place. 6. He is not a manufacturer of such goods as may be notified by the Government during the preceding financial year | |||||||||||||
| Validity of Composition Levy | It depends on fulfillment of conditions (discussed above), however an eligible person for scheme may also opt out of the scheme by filing an application. In case Proper Officer has reasons to believe that taxpayer is not eligible for scheme or contravened any Rules or ACT, he may issue show cause notice followed by an order denying the entailment of scheme. | |||||||||||||
| Rate of Tax | The rate of tax prescribed for different categories of registered persons have been described below:
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| Condition satisfied | Condition Not satisfied | Self withdrawal | the proper officer has reasons to believe | |
| Option remain valid | Pay tax as normal tax payer issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of occurrence of such event. | withdraw from the composition scheme shall, before the date of such withdrawal. file an application in FORM GST CMP-04, duly signed or verified through EVC, electronically on the Common Portal. | Tax payer not eligible or or has contravened the provisions of the Act or these rules, he may issue a notice to such person in FORM GST CMP-05 to show cause. Within fifteen days of the receipt of such notice registered person in FORM GST CMP-06 reply. the proper officer shall issue an order in FORM GST CMP-07 within thirty days of receipt of such reply, either accepting the reply, or denying | |
BY CA SURENDRA AGRAWAL
(M.com,LLB,ACA)
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